Philips Electronics on Monday said it would divest its struggling
television business as first-quarter net profit came in below
expectations.
Royal Philips Electronics announced that it has entered into a term
sheet to transfer its Television business into a joint venture with TPV
Technology as part of a long-term strategic partnership. The new
company will be 70% owned by TPV and 30% by Philips.
"The partnership will help create the scale and focus needed for our
Television business to return to profitability and to be successful in
the very dynamic television industry," said Philips Chief Executive
Officer Frans van Houten. "We are committed to the continuity of
Philips Televisions in the market through this venture. The partnership
will leverage the strength of the Philips brand, innovation power and
trade relationships, with the additional scale and manufacturing
strengths of TPV. This decisive step is the right one for the television
business, Consumer Lifestyle and Philips as a whole."
The joint venture will be responsible for the design, manufacturing,
distribution, marketing and sales of Philips' Television business
worldwide, with the exception of mainland China, India, United States,
Canada, Mexico and certain countries in South America. As part of the
transaction, Philips will grant the joint venture the right to use the
Philips brand, under certain strict quality and customer care standards,
for the Television business worldwide, excluding the above-mentioned
territories. In exchange, Philips will receive revenue-based royalty
payments. The existing brand license agreements in China, India and
North America will not move to the joint venture, Philips said.
Philips currently licenses its TVs to TPV in China as well as Funai in
the United States and Videocom in India.
The joint venture will not pay any royalty in 2012 and will pay
royalties of at least EUR 50 million annually from 2013 onwards, Philips
said. For the financial year 2013, the annual royalty payable will be
2.2% of sales. From the financial year 2014 onwards, the annual royalty
payable by the joint venture will be 2.2% of sales, which can be
increased with a variable component up to a maximum of 3% of sales
"subject to certain performance criteria," the company added.
The signing of definitive agreements is expected to take place in the
third quarter, with closing expected to take place before the end of
2
Sales of Philips? TV business amounted to more than EUR 3 billion in
2010.
Philips announced first-quarter net profit of 138 million euros, down 31
percent from a year ago and below forecasts.